Debt Relief Regulations


The Federal Trade Commission has issued new rules to protect consumers in debt.


Amendments to the Telemarketing Sales Rule will prohibit for-profit companies that offer debt relief services over the telephone from charging fees before your debt is settled or reduced. The new rules will take effect on October 27, 2010.


Several new rules will also take effect on September 27, 2010. They are as follows:


1 - Debt relief companies will be required to make specific disclosures to consumers.


2 - Marketing claims must be substantiated, which will eliminate misrepresentations.


3 - The Telemarketing Sales Rule will cover calls consumers make to these firms in response to advertising.


Required Disclosures


Before consumers sign up for any debt relief services, providers must disclose how their service works, including:


How long it will take for consumers to see results.

How much it will cost.

Negative consequences that could result from using debt relief services

Information about the dedicated FDIC insured third party accounts available to consumers.




The final rules also prohibit misrepresentations about any debt relief services, including success rates and whether the provider is a non-profit entity.


Advance Fee Ban


Starting on October 27, 2010 the Final Rule will list specific requirements for debt relief companies about charging an advance fee before providing any services. It states the fees for debt relief services may not be collected until:


1 - The debt relief service succcessfully negotiates, settles, reduces or otherwise changes the terms of at least one of the consumer's debts.


2 - There is a written settlement agreement, debt management plan, or other agreement between the consumer and the creditor, and the consumer has agreed to it.


3 - The consumer has made at least one payment to the creditor as a result of the agreement negotiated by the debt relief provider.




Bureay of Consumer Protection (FTC) - Debt Relief Services & the Telemarketing Sales Rule: Guide

Federal Trade Commission: FTC Issues Final Rule to Protect Consumers in Credit Card Debt